Condo Conversion Vendor Selected

Dear Shareholders

When we were elected as Board of Directors, we made a commitment to complete the conversion project as our number-one priority. The conversion had faced many delays leading up to our tenure, and several more followed as we worked through issues that arose throughout the process. Over the past several months, we have focused our energy on identifying vendors who could successfully complete this conversion effort in today’s environment. There are complicating factors at work today that didn’t exist before, and the process is becoming increasingly complex and heavily reliant on Fannie Mae (FNMA). In researching potential vendors, we followed every lead available to us to identify firms and attorneys that might be able to see the conversion through. In total, we contacted 34 attorneys, firms and consultants.

We narrowed the search to two potential vendors, which we have extensively vetted over the past several months: Murakami Law and ROA Hutton. We were very fortunate to have proposals from these two skilled vendors, both with a history of successful conversions and are well-respected in the conversion industry. Our goal was to ultimately select a consultant whom could demonstrate extensive experience in: cooperative to condo conversion, navigating 2014 FNMA regulations, and additionally could provide evidence of recent successful co-op conversions and relevant progress. It was imperative to us that the selected consultant provide a detailed proposal and plan to work collaboratively with lenders and FNMA using proven strategies, to avoid further delays in our conversion effort. The Board was very impressed with Tim Murakami and Tim Shuey's town hall presentation on July 9th. Mr. Murakami presented a conversion strategy that he felt would effectively cut through the FNMA and lender financing impasse. However, when later presented with additional information from NCB representatives, it was determined that his initial strategy would not work as planned. The Board was eager to consider a proposal by Mr. Murakami, so additional time was provided for a new strategy to be developed. The revised strategy Mr. Murakami presented was one that had not been attempted before. This strategy would require additional legal complexity and would incur expenses beyond the scope of the initial proposal. Although Mr. Murakami felt confident that his revised strategy would be successful, the same was said of the initial plan which raised some concern to the Board. Additionally, the particulars of the plan and the fact that it was untested meant unanticipated setbacks could be encountered and result in additional costs and delays. Mr. Murakami asked that the details of his strategy not be publicly disclosed, so we are unable to go into much detail. However, as the conversion strategy itself is paramount in the success of this conversion, the Board struggled with the particulars of Mr. Murakami’s conversion plan and the implications it would have on The Royal Palms.

So, after careful and extensive deliberation regarding both vendors and their respective strategies, the Board members have voted unanimously (5-0) in favor of hiring ROA Hutton to complete the conversion. After examining all details available, the Board is convinced that ROA Hutton is the strongest and most experienced conversion consultant able navigate the Royal Palms through the FNMA approval process and complete the conversion in the most efficient timeline possible. ROA Hutton has already obtained an FNMA Conditional PERS approval in 2014 for a cooperative conversion in Northern California which provides a path for the Royal Palms to follow. Additionally, as part of the agreement, ROA Hutton will retain a reputable California-based attorney as part of our fixed-cost contract so the Royal Palms is guaranteed not to incur any additional legal expenses.

This decision was not easy, but we sincerely believe it to be the right one. We have listened to some shareholders voice their opposition to ROA Hutton and all opinions were given great consideration. However, with our access to privileged information from lenders, title professionals, realtors, HOA board members from other conversion project communities, and other industry professionals, we were able to form a more accurate view of each consultant’s capabilities and process beyond just their proposals and reputations. We were provided first-hand experiences of how the consultants communicated with the communities and board members, handled FNMA PERS approval and managed any problems that arose in the process. These insights combined with the knowledge developed over months of extensive due diligence gives us full confidence that ROA Hutton is the firm that will be able to complete this conversion given the current environment.

We want to thank you all for putting your faith in the five of us to do what is best for this Association, and ask for you to trust us and our judgment. We as a Board stand united in this decision, and we encourage you to join us in supporting ROA Hutton get this building converted. We can do this, but we must do it together.

We will be providing additional information shortly, and invite you to pose any questions you may have to conversion@100atlantic.com.

Sincerely,
Royal Palms Board of Directors